NPFs drop a further Euros 175 million in July-September 2019, Central Bank says

A further decrease of Euros 175 million or 1.8% was recorded in aggregate NPFs at the end of September 2019, compared to the end of June 2019, and, as a result, a fall in the ratio of NPFs to total facilities was recorded from 29.8% at end-June 2019 to 28.8% at the end of September 2019, according to the Central Bank of Cyprus, which notes that there has been an improvement in the factors contributing to the reduction of NPFs.

At the same time, total facilities increased by Euros 449 million or 1.4% from Euros 32,598 million at end-June 2019 to Euros 33,047 million at the end of September 2019.

The Central Bank notes that during the period between 31.12.2014-30.9.2019, there has been an overall decline in NPFs of Euros 17.8 billion or 65.1%.

As a result, according to the Central Bank, the coverage ratio rose to 52.4% at end-September 2019 compared with 51.1% at the end of June 2019.

The downward trend in NPFs during the third quarter of 2019 can be attributed mainly to loan repayments, loans which have been successfully restructured and reclassified as performing (cured) at the end of the probation period as well as debt-to-asset swaps.

The fall in NPFs is also due to the rise in loan write-offs, which take place in the context of restructurings and usually concern amounts that already form part of credit institutions’ loan loss provisions. However, non-contractual or “accounting” set-offs are also made against amounts already provided aimed at a more representative depiction of loan portfolios.

Furthermore, according to the Central Bank, total restructured facilities at end-September 2019 amounted to Euros 5,872 million, of which Euros 4,249 million continue to be classified as NPFs, partly due to the definition of NPFs as explained above.

A net reduction in restructured facilities of Euros 241 million has been exhibited at the end of September 2019 compared with end-June 2019.

The Central Bank notes that credit institutions apply the definition of NPFs adopted by the European Banking Authority. Based on this definition, when an NPF is restructured it is not immediately reclassified as a performing facility but remains under observation within the NPF category for a further period of at least 12 months, even if the customer strictly adheres to the new agreed repayment schedule.

Source: Cyprus News Agency